Learning to Let Go of the Family Business: The Legacy Problem
On the way into work today I was listening to sports radio and they were debating whether David Ortiz of the Boston Red Sox was going to proceed with his planned retirement at the end of this season, or change his mind and retire later.
He is having a great start to his final season, and this has some speculating on whether he might play longer.
Sports athletes are notorious for staying on too long and chasing their legacies.
How many times have you seen an athlete hurt their legacy by playing too long and being remembered for their sub-par play at the end of their career, rather than getting out at the top?
Think Brett Favre.
It had me thinking this is a similar dilemma family business owners face when they reach their senior years.
There is no retirement age in a family business.
The senior generation can stay on as long as they want, often beyond their shelf life.
There are many reasons for wanting to stay on longer than they should, including succession concerns, fear of retirement, and personal finances, to name just a few.
One major reason is chasing their legacy and wanting to leave on a high note.
They want to preserve their legacy by leaving when the business is peak performing. This puts them on a vicious circle of chasing success.
Too often while waiting for perfect, opportunities are lost.
I’ve witnessed two real-life examples, including:
- An outside CEO who joined a new company to salvage their legacy of past poor performance
- A family business owner who waited too long and missed the window to sell their business at a good value
Letting Go of Leadership
We had an outside CEO in our family business that joined us after heading up a large publicly held business.
He grew the previous business very successfully until the economy and other industry issues put it into near bankruptcy.
The owner who stays on too long is often the last one to realize it.
He was very successful growing our business. I always felt one of the reasons he joined our business was to finish off his career on a high note with a more pristine legacy.
Letting Go of Ownership
Often the senior generation exits the family business without passing it on to the next generation, instead choosing a sale of the firm.
The same dilemma faces these owners when they receive the business valuation and realize it’s lower than expected.
One family business that we were close to held off putting their business on the market, hoping to catch the next favorable economic cycle to maximize their sale value.
By the time the economy began to improve, their operations were struggling.
This back-and-forth between the economy and their operations went on for several years and never coincided enough to reap a high business valuation.
They sold the family business at a substantial discount. If they had accepted a lower bid earlier, they would have been much better off.
- Let go, as close to the top of your game as possible. But remember that like the stock market, it’s hard to catch the peak.
- Be aware when you’re chasing moving goal posts. Your company’s performance and industry conditions are constantly changing.
- Always ask yourself if you’re the problem. The owner who stays on too long is often the last one to realize it.
When do you know it’s time to let go? Probably a few years after you should have. In David Ortiz’ case, it’s an easy $24 million decision.
Published with permission from the Northeastern University Center for Family Business.
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